The BNZ's profit has been knocked sharply lower by the effects of Covid-19 pandemic, but it's confident the worst is behind it.
Photo: RNZ / DOM THOMAS
The bank, owned by Australia's NAB, reported a net profit for year ended September of $762-million compared with last year's $1.02 billion, as its margins were squeezed by low interest rates, rising costs, and it set aside $300m for bad and doubtful debts nearly three times the level of the year before.
Chief executive Angie Mentis said the bank and the economy had come through the pandemic in better shape than might have been thought.
"When we look at our customer base we helped about 30,000 with Covid support worth about $10bn and about 70 percent of those are now returning to pre-covid, and we're really pleased that our customers are showing strength."
She was confident that the level of bad and doubtful debts was at its peak and that the final cost might come in below the $300m set aside, although she cautioned that the pressure on the tourism sector during the summer holiday season might be significant.
Mentis said the BNZ had just had a record month of mortgage lending and keeping a "watchful eye" on the sector, but she stopped short of saying it was becoming overheated and needing action by the Reserve Bank, such as the reimposition of the loan to value ratios (LVR) lending controls.
Overall lending was flat for the year at $88bn, but deposits rose nearly 6 percent to $71.8bn.
She said economic recovery would be driven by the improvement in the fortunes of small and mediam sized businesses (SMEs), which was one reason the BNZ had loaned $320m to more than 400 firms through the government-backed business finance guarantee scheme, the most of any retail bank.
Mentis said the likelihood of the RBNZ rolling out a funding for lending programme - cheap loans for banks - might make it unnecessary for the central bank to take its official cash rate below zero.
"We are prepared for a cash rate to be negative ... I think the funding for lending programme the Reserve Bank needs to see if that's effective enough because we might not need to go into negative interest rates."
Some wholesale interest rates have gone negative in recent weeks, but a cash rate below zero would further dent bank margins.
The BNZ's capital ratio improved markedly reflecting the RBNZ's ban on major banks paying dividends to their Australian owners.